Balfour Beatty urged to return to the table over £3bn Carillion merger

A major shareholder cranked up the pressure on builder Balfour Beatty to reopen talks over a £3 billion merger with rival Carillion today as the clock ticked down towards a Takeover Panel deadline to agree a deal.

The friendly agreed merger became acrimonious three weeks ago after Carillion’s U-turn over the fate of highly-profitable US business Parsons Brinckerhoff, which Balfour is selling but Carillion now wants to keep.

Balfour, without a chief executive and hit by a clutch of profit warnings, ended talks as a result. But a shareholder in both firms, Standard Life, has now gone public, urging Balfour back to the table three days ahead of Thursday’s “put up or shut up” deadline.

David Cumming, head of UK equities at Standard Life, told BBC Radio: “We do believe there are significant synergy benefits from a deal that Carillion can take a lot of cost out and deliver that to the benefit of both shareholders. If they can agree terms, there is a case for a merger.

“Having said that, Carillion has approached Balfour Beatty at a low point in the company’s fortunes with no chief executive and a depressed market valuation. There’s scope for Carillion to modestly improve its terms. If they do that, Balfour Beatty should reopen merger talks unless they have got a credible alternative.

“At the moment all we have got is a combination of patience and the triumph of hope over experience.”

Standard Life owns 2.4% of Carillion and 3.5% of Balfour Beatty. The current deal involves Balfour’s shareholders holding 56.5% of the new company with 43.5% heading to Carillion investors.

Any improvement in the terms is almost certain to see a bigger share of the business going to Balfour investors rather than any cash incentive.

Carillion said it can deliver at least £175 million in savings through the combination, although Balfour has cast doubt on the ability of its management team to drive through cost savings in a much bigger firm with 80,000 staff.

Carillion was today also forced to clarify chairman Philip Green’s weekend comments that its plans for an overall £1.5 billion in savings had been “audited”. The firm said the savings had “not been ‘audited’ in the technical sense” but verified by an independent accounting firm.